Tuesday, July 5

How is underground Bitcoin mining in China?

Key facts:
  • There are still mining pools that are agreeing to work with miners based in China.

  • Miners build their own electrical substations, with which they can supply themselves.

Quite a feat and a great risk. Those are the two new characteristics of Bitcoin (BTC) mining in China, a country where hydroelectric dams, pools and clandestine operations became the options for miners to continue operating and go unnoticed by the government’s ban.

One reportage from CNBC published this weekend on the mining activity in the Asian giant revealed the ways in which the operation is maintained. According to sources in that medium, China, even with the ban, concentrates 20% of the global hash rate.

According to the sources consulted by the US newspaper, it is the small miners that continue to operate without attracting the attention of Chinese regulators. For that, divided their mining operations into several farms across the country, so that the authorities could not detect them.

Others were smarter and took advantage of local energy sources, such as hydroelectric dams in rural areas that are independent of China’s main power grid.

One of those consulted by CNBC, who has mined cryptocurrencies since 2015 and is called “Ben”, revealed that he has 1,000 mining platforms that work supported by the main network and another 5,000 units working with hydroelectric energy, taking advantage of the source located in the province of Sichuan, southern China.

The miners that it has connected to the main network are scattered throughout the country, all on account of avoiding detection by the government. «They are everywhere [los mineros]. You will not find a pattern, “he pointed out to the media, and then specified that his teams are connected to the industrial power lines of some friends’ companies, which allow you to take in additional energy.

Marshall Long, who is a longtime Bitcoin miner, validates that. “They are extracting from the network, and now they are on a smaller scale, so they are fragmented,” he said, referring to his friends who mine in China without being detected.

Miners rely on pools to operate undetected by the Chinese government / Source: Amazon.

“Usually they do it with 20 megawatts or less, so they are like buying a house in their own way to allow them to mine on a small scale,” said the specialist.

Returning to the hydroelectric issue, they highlight that the rainy season in China, which runs from May to October, together with the monsoon rains, are translatable as energy abundance. This is generally taken advantage of by the dams located in the Yunnan provinces and the aforementioned Sichuan..

In the second, “there are many miners connected to hundreds and thousands of hydroelectric dams,” in the words of Kevin Zhang of the Foundry company.

Ben, according to CNBC, has the majority of his rigs running on hydropower, adding two locations in Sichuan. One operates with 12 megawatts and another with 8 megawatts. Although it is little, he affirms that, at the present time, a farm with more than one megawatt is a “considerable” site, given the constraints.

Mining pools, a haven for Bitcoin miners in China

Regarding the pools, they highlight in the report that most of the Chinese miners that continue to operate even with all the risk that this entails, they do by relying on mining pools, with which they can hide their fingerprints, as they combine their computing power.

While there are many mining groups that have announced a suspension of services within China, various media sources said that some foreign groups are still hiring Chinese miners.

“They hide their hash rate,” Ben said, referring to miners joining the mining pools, where they collaborate. but without signing their names, breaking the protocol of Bitcoin mining.

“A pool does not have to reveal any data. Basically, you are telling the world that my income is only half of what I actually have. You don’t brag about it, ”Ben pointed out.

Distribution of the hash rate in the different mining pools / Source: Braiins.

Indeed, such action may help to understand why China’s share of the global BTC market dropped to zero, as mining data are based on data that is voluntarily shared by pools.

While pools are a quiet option for working with Chinese miners, it is also true that they have been quite useful for many of the operations that are going on clandestinely, according to the sources of the medium.

“There are some bigger pools that still care. In fact, they provide a great deal of technical support to help them, in case their own people don’t have the technical ability to set it up, “said Ben.

In fact, Ben himself confessed to working with a pool. He said that a server helped him make his farm appear to have fewer connections, because when an IP address has thousands of points, results in suspicious activity that is later pursued.

“After they do their magic, you will only see five (mining) machines, which then does not seem suspicious, because any home can have that,” he said.

Build your own substations

In China, inventiveness is common. In addition to pools and hydroelectric power, the miners bet on the construction of their own substations, with which they can be supplied from power plants.

Here, the transformers take the energy from a substation of the national electricity system and convert it to a higher voltage low which can then be used to feed Bitcoin miners.

However, that measure is still visible in the eyes of the authorities, who persecute those who defy the ban on mining Bitcoin, as we reported in CryptoNews.

China Telecom, which is one of the telecommunications companies in that country, also acts as a prosecutor and police against mining, monitoring electricity usage.

As Ben explained, when a disproportionate use of energy is identified, China Telecom refers the activity to the central government, who then transmits this information to the specific province or city where the alleged mining is taking place. From there, the local government calls the power plant directly to investigate the accusation.

The miners bet on the construction of their own substations, with which they can supply. / Source: Pixabay.

Likewise, Bitcoin miners often operate by hiding their IP address through the use of a VPN, in an attempt to hide the fingerprint. But nevertheless, the Chinese state knows about this trick and, therefore, has advanced against its use.

Either way, all of this shows that even with the most enforced bans, Bitcoin is unbeatable. China certainly struck a heavy blow against mining on its territory, without that supposing its elimination. It remains to be seen if the tight control that, apparently, has deteriorated in a few weeks will be maintained in 2022.


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